What is Net MRR Churn Rate?
How to Calculate Net MRR Churn Rate
Net MRR Churn Rate measures the net percentage of Monthly Recurring Revenue lost from existing customers during a specific period. You calculate it by subtracting expansion MRR from contraction MRR, then dividing by starting MRR and multiplying by 100.
Net MRR churn rate formula
The formula shows the net change in revenue from your existing customer base:
Net MRR Churn Rate = [(Contraction MRR - Expansion MRR) / MRR at Start of Period] * 100
Practical calculation example
For example, say your company starts January with $200,000 in MRR. During the month, you lose $10,000 from downgrades (Contraction MRR). However, you also gain $15,000 from existing customers upgrading their plans (Expansion MRR). The calculation would be: [($10,000 - $15,000) / $200,000] * 100 = -2.5%.
How Should Businesses Interpret Net MRR Churn Rate
Net MRR Churn Rate is a true indicator of your business's sustainability. It tells you if revenue from your existing customer base is growing or shrinking. A negative rate is ideal, as it shows that revenue from upgrades and expansions is greater than revenue lost from churn and downgrades.
If the rate is positive, it means your business is losing more revenue from existing customers than it is gaining. This signals a need to focus on customer retention and expansion strategies. Tracking this metric helps you make informed decisions to secure your revenue streams.
Net MRR Churn vs Gross MRR Churn
The primary difference between net and gross MRR churn lies in what they measure:
Net MRR Churn Rate provides a more complete picture by including positive impacts from upgrades and add-ons. It is a better indicator of your ability to grow revenue from existing accounts.
Why Net MRR Churn Rate Matters
This metric is critical for Revenue Operations (RevOps) and finance leaders for three key reasons:
Customer health indicator: Shows that customers are satisfied and finding increasing value over time
Revenue predictability: Lets you create accurate forecasts and financial plans for sustainable growth
Investor confidence: Demonstrates a scalable business model that can grow without relying solely on new customer acquisition
Industry Benchmarks for Net MRR Churn Rate
Based on recent industry data, here are target benchmarks by company stage:
Early-stage Software-as-a-Service (SaaS) companies (under $10M in Annual Recurring Revenue, or ARR): -1.0% to -2.5% monthly rate indicates strong performance
Growth-stage companies ($10M-$100M ARR): -0.5% to -1.5% monthly rate shows healthy expansion
Enterprise companies ($100M+ ARR): Any negative rate demonstrates excellent retention and expansion capabilities
A positive net MRR churn rate always signals the need for immediate retention strategy improvements.
Understanding Negative Net MRR Churn
Negative net MRR churn occurs when your expansion MRR from existing customers exceeds the revenue lost from churn and contraction MRR. This is the gold standard for subscription businesses. It means your company's revenue continues to grow even if you do not acquire any new customers.
Achieving this state demonstrates strong product-market fit and successful upselling or cross-selling strategies. It transforms your existing customer base into a reliable growth engine. This makes the business more resilient and financially efficient.
Frequently Asked Questions About Net MRR Churn Rate
What's the difference between net revenue retention and net MRR churn rate?
Net Revenue Retention measures annual revenue retention from existing customers. In contrast, Net MRR Churn Rate tracks the monthly change in MRR from the same customer base.
How often should you calculate net MRR churn rate?
Most SaaS businesses calculate it monthly for timely insights into customer health and revenue trends. Quarterly calculations work well for board reporting and strategic planning.
Can net MRR churn rate be negative?
Yes, and it's highly desirable. A negative rate means expansion revenue from upgrades exceeds revenue lost from cancellations and downgrades.
What causes high net MRR churn rates?
High rates stem from customer churn, frequent downgrades, and insufficient expansion revenue. This is often due to poor product-market fit or weak customer success efforts.
Additional reads
What is Gross MRR Churn Rate? — Compare the two key churn metrics
Net Dollar Retention Guide - Master the relationship between churn and retention
Churn vs. Retention Rate - Understand when to focus on customer count vs revenue impact
2025 State of Recurring Revenue Report - Latest benchmarks and industry insights
See how Chargebee helps you monetize with confidence — book your personalized demo today.
